Tuesday, June 18, 2013

No preliminary injunction in consumer class action

Silber v. Barbara's Bakery, Inc., --- F.Supp.2d ----, 2013 WL 2948154 (E.D.N.Y.)

Plaintiffs in this putative consumer class action unsuccessfully sought a preliminary injunction against the allegedly false advertising of certain Puffins cereal and snack products as “all natural” when they actually included synthetic ingredients and GMO corn.  The parties strongly disputed what “natural” meant, since the FDA hasn’t seen fit to provide a definition.  Plaintiffs cited a study indicating that most consumers believes “natural” implies the absence of GMOs, and another finding that nutrition-related health claims on cereal boxes “lead to greater willingness in parents to buy those cereals for their children,” along with other evidence of consumer concern.  For example, a Rhode Island health food store pulled all defendant’s products from its shelves after learning about the GMOs.  Plaintiffs sought an injunction against the labeling, or immediate reformulation of the products in the alternative.

The court found no irreparable harm, defined as the harm from the deceptive advertising done to individual consumers—the plaintiffs didn’t rely on concerns about food safety, effects on the ecosystem, etc.  Plaintiffs argued that irreparable injury should be presumed under NY GBL §349, citing also Lanham Act cases brought by competitors.  The court found no authority for presuming irreparable injury to consumers.  False advertising suits by competitors were “qualitatively different from those brought by consumers, who need not prove lost sales or harm to brand equity.” Courts presume irreparable harm in the former case because it’s “notoriously difficult” to prove lost sales or harm to brand reputation.  But it’s “neither difficult nor impossible to prove the losses related to excessive or inflated costs in false advertising suits brought by consumers.”  Thus, competitors’ excuse from showing irreparable harm didn’t apply.

Separately, plaintiffs unreasonably delayed in seeking a preliminary injunction.  They waited nearly five months after suing to move for injunctive relief.  They were aware of their rights and not actively pursuing them elsewhere; thus the general rule that delay destroys a presumption of irreparable harm applied. “Furthermore, Plaintiffs are average consumers—they are not competitors or commercial sellers for whom lost goodwill or brand confusion stands to cause permanent fiscal injury, which would be exacerbated by delay in seeking permanent relief.”

And money damages would adequately compensate the plaintiffs, making any injury reparable.  Plaintiffs argued that deceptive injury, distorting consumers’ decisions, was irreparable in itself.  But plaintiffs couldn’t explain how, other than through excessive pricing, the deceptive ads injured the plaintiffs.  (I can, and I think it’s at least of equal dignity to other injuries regularly considered irreparable, though I understand why recognizing it would make things difficult—if the claims are truly false and misleading, then the harm they inflict isn’t just monetary; it’s harm to the dignity and autonomy interests of the consumer.  In Kantian terms, deception is wrong because it treats the consumer as a means rather than as an end.  At least in cases of willful fraud, most victims don’t feel whole even if they get their money back; it’s the trickery, the disrespect, that inflicts the extra injury.)

Given that plaintiffs sought compensatory damages and restitution for the excess price they alleged they paid, the court didn’t believe them when they said money damages were inadequate. (The court also expressed some skepticism about the money damages from the “supposed” higher price for “natural”-labeled products, since plaintiffs didn’t provide many details about pricing.)  Though Section 349 aims to “strongly deter deceptive business practices” through issuance of injunctive relief, these statutory provisions “do not relieve a litigant moving for a preliminary injunction in federal court from the general requirement that she demonstrate irreparable injury.”

Though it wasn’t necessary, the court went on to conclude that the balance of hardships favored Barbara’s Bakery.  Plaintiffs were essentially seeking a product recall, which was excessive in a false advertising case without physical injury.  Plaintiffs argued that Barbara’s could just use stickers to cover up the misleading language, but despite the “charm” of this alternative, the court wasn’t persuaded.  “[W]hether or not Defendant eliminated its allegedly deceptive advertising through the use of stickers, Defendants would be forced to execute product alteration on a national scale in order to remove all references to its products' ‘All Natural’ ingredients from its product packaging.”  Given plaintiffs’ delay and the compensabiltity of the harms through money, the burden of making such changes “clearly outweighs that of Plaintiffs in continuing to pay a possibly premium price for Defendant's products.” 

The court also noted that a settlement agreement was pending in a case bringing similar claims in the Northern District of California. The proposed settlement contemplates the same relief requested here—an injunction against “All Natural,” “No Artificial Additives,” “No Artificial Preservatives,” and “No Artificial Flavors.”

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